At the focus of attention: demanded 20 mln euros

The
article was prepared for the International roundtable-seminar “Latvian banks: what lies ahead?” held in the Baltic
International Academy on 18 May 2016. Its organizers: Baltic International Academy (BIA),
Employers’ Confederation of Latvia (LDDK), Diplomatic Economic Club (DEC) and
online magazine baltic-course.com.

Having realised that no bail would
be received, as his next step the investigator chose to instigate personal charges
against the President of Rietumu Banka.

Comments the president of Rietumu Banka Aleksandr Pankov in an
interview with DB [Dienas Bizness].
- Recently the ‘Panama documents’ have been a much discussed topic in the mass
media. Rietumu Banka has been
mentioned in connection with them, but the bank has so far refused to comment
on anything. Why?

First, we must say that so far we do not know whether these documents
contain any information that might be connected with Rietumu Banka. Thus, as a matter of fact, there is nothing on which
to comment. Generally we support the policy of supervision of financial sector
policy, transparency and the exchange of financial information on an
international scale. However, it should be underlined that such an information exchange
process should take place in accordance with the law. We are a bank, and no one
has released us from the duty to comply with specific procedures, from taking
care of safeguarding the personal data of our clients, as well as from compliance
with bank confidentiality regulations.

- Tell us about the case instigated in France,
including against the bank you manage.

This is not a new case. French
investigators launched an investigation against a number of French nationals
and the company France Offshore about five years ago. A number of international
banks were being investigated, including the Latvian bank Rietumu Banka. To understand the next steps of the investigation,
it is necessary to take into account the particularities of French court
proceedings that differ significantly from Latvian proceedings. An investigator
in France has very broad powers, also acting as a judge. Namely, the
investigator has sole rights to take decisions that are compulsorily executable
in the territory of France. Based on this, the investigator requested that
banks, which, according to the information at his disposal, had cooperated with
France Offshore, should pay cash bail for the period of the investigation. The
amount of bail set for Rietumu Banka was
20 million euros. According to international practice, to execute such a decision
needs to be approved in Latvia under the prescribed procedure. However, Latvian
law does not provide for the application of such cash bail. We requested and
received clarification of the matter from the relevant Latvian institutions. A
situation arose in which Rietumu Banka
– that operates in terms of the Latvian legal environment – would actually
breach the laws of this country should it execute the requirement of the French
investigators. We notified the French side of that, and offered other types of bail
that are provided for under Latvian laws and that in our opinion might have been
acceptable during the French investigation proceedings. However, neither our
proposals nor our position was taken into account. In assessing the situation
generally, we believe that the investigator was seeking to exert maximum
pressure on Rietumu Banka. Having
realised that no bail would be received, as his next step the investigator
chose to instigate charges personally at the president of the bank,
disregarding that Rietumu Banka had
been cooperating constructively throughout all stages of the investigation and
had timely fulfilled all the investigator’s requests in compliance with Latvian
law. It should be noted that we found it very strange that the French
investigation did not want to respect and take account Latvian law, i.e. the
law of a friendly European country that is a Member State of the European
Union.

- The French side accuses you of taking part in
activities that are aimed at tax evasion. What type of activities and accounts does
this exactly concern?

Our research shows that it is mainly
all about savings type accounts, and there have not been active transactions
relating to these. Just like all other accounts, these accounts have been monitored
under anti-money laundering (AML) policy. In cases where such accounts did not
satisfy AML criteria, we closed them.

- Were these also offshore accounts?

It should be pointed out that it
is not uncommon that anything associated with offshores is mixed together and
presented as something bad or even illegal in itself in the mass media. The
truth is that such form of organising a business has been long known and
legitimate. It is a common practice used by international holdings, shipping
companies, large and conservative Western pension funds with impeccable
reputations, which could not even be suspected of carrying out any illegal or
risky activities. In this field, international rules need to be complied with –
there are lists of “bad” offshores, which, by the way, do not include Panama.
If international bodies or, for example, a country, were to consider that these
lists should be expanded, they have all the rights and opportunities to do so.
We, on our part, would strictly respect such decisions. However, creating
business structures and advising on such matters is not our business. We are a credit
institution, and our business is lending, investing, financing various
development projects, providing advice on investing in financial markets, and
servicing such transactions. We comply with the anti-money laundering policy
stringently; relevant audits are carried out at the bank on a regular basis. We
have all the necessary tools to track and identify suspicious transactions.
When identifying a suspicious case, we provide the information to the Money Laundering
Prevention Service as required by the law.

- Another topic of interest to
many is the commercial relations of Latvian commercial banks with their
international counterparties, in particular with our correspondent banks in the
United States. What is your opinion of the situation?
Latvia currently has only one correspondent bank for direct dollar clearing –
Deutsche Bank. Therefore I completely understand the concerns about what would
happen if Deutsche Bank left our market. The banks involved in international
financial business are very well aware of the importance of this matter.
Considerable effort is being devoted to ensuring that we should be transparent
and comprehensible to US financial structures. And I can assure you that we
have achieved remarkable success within the last 12 to 18 months or so. Last
week I returned from the USA where we took part in many meetings with the CEOs
of large US banks; I personally had the opportunity to ascertain that the
reputation of Latvia is changing for the better. In this regard we have felt
great support from the Latvian public authorities. Recently an important
meeting was held in the USA attended by the Latvian Finance Minister, the
management of the Bank of Latvia, and the management of the FCMC, all of which
are also working on these matters. Incidentally, the latest news concerning Latvia’s
compliance with the standards set by the Organisation for Economic Development
and Cooperation (OECD) is yet further proof of our good reputation. Latvia's
image abroad depends not only on the strengthening of financial supervision,
but also on how this information is presented and commented on. This affects economic
development, the availability of affordable credit resources, and the
development of the middle class in this country.

- There has been talk that a
large group of Latvian banks will soon need to undergo an audit carried out by US
AML experts. What do you think of that?

Well, this work is already
being carried out. I think it is an important and positive step in improving mutual
understanding with our counterparties. The US auditors will have access to all
our procedures and processes, they will be able to familiarise themselves with
the required information, as well as the methods of information processing. We
understand that for the US regulator and US banks it is important that the
audit is carried out by US experts. The very process and results of this audit
will be very important in strengthening mutual trust and the transparency of
our financial system.

-
Based on last year's
performance, Rietumu Banka is ranked
as one of the top three Latvian banks. Does this mean that from now on your
bank's activity will be supervised from Frankfurt?

It is true that in terms of
key indicators and total assets Rietumu
Banka has strengthened its position in the leadership group, outperforming a
bank belonging to the Swedish SEB group. So yes, such development of events can
be expected.

- According to recent
information, new and more stringent AML requirements have been adopted in
Latvia. What do you think of these developments?

The new regulation sets forth very
accurate and clear formulations and requirements. For instance, it lays down an
accurate definition of a ‘shell company’ and how to proceed in certain cases
when servicing the transactions of such customers. I think that this regulation
will help improve the application of statutory requirements in practice. All banks
are currently actively involved in the implementation of these requirements,
which need to be implemented by 1 September.

-
Control measures applicable to
the exchange of customer data are being strengthened on a global scale. What
does this mean for Latvia?

We can observe a complete
globalisation of this process. After the FATCA (Foreign Account Tax Compliance
Act) standard was introduced in the USA, the duty to provide information to the
USA on the financial operations of residents was imposed on countries using US
currency in their operations. This experience has been recognised as successful,
and has led to the idea of creating an international club in which global data
exchange on the operations of taxpayers in the club’s member states would take
place. Fifty-five countries, including Latvia, have joined this club. Now the
member states are adapting their national legislations in order to ensure the
exchange of such information. In other words, Latvia will have a duty to inform
other countries about the financial activities of its residents. Conversely, it
will receive details about the activities of Latvian taxpayers abroad. This
mechanism will enable the French authorities to get information about the
foreign accounts of their taxpayers, including cases where the taxpayers would
have withheld such information from their tax returns.
- You were rebuked for refusing to comment on negative information. What is
your opinion on the fairness of leaking information in the public space?

Generally, one can understand
the motivations of young and ambitious journalists who research their topics.
But speaking of, for example, the ‘Panama Files’, one should take account of
the lawful interests of those whose personal information has been leaked. The
confidentiality principle regarding personal information has not been cancelled
yet. Let’s also not forget that information about the goal of those leaking the
data is missing, we know nothing about it. We are also of the view that any
commenting or drawing of any conclusions before the investigation has been completed
is not right or proper. We are confident that all our activities comply with the
statutory requirements and, if necessary, we are ready to prove our case in
court.

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